Term life insurance

Term life insurance is for a set time, like 30 years. This time is called the ‘term’ of the policy.

People often get this insurance to help pay off a loan or mortgage, or to provide money for things like raising kids or funeral costs. For example, if you have 20 years left on your mortgage, you can get a term life policy for 20 years.

Decreasing Term Life Cover

The money this policy pays out gets smaller over time. It’s good for when you’re paying off something like a mortgage that decreases over time.

Level Term Life Cover

With this one, your family gets the same amount of money, no matter when they claim it.

Increasing Term Life Cover

This policy’s payout grows over time. It’s useful if you think your family will need more money in the future, like if you have young kids. The payout can go up either with inflation or at a set rate. With a fixed rate, it might increase faster than inflation if you keep it for a long time.

Whole of life insurance

This insurance covers you for your entire life, not just for a certain time. You keep paying into the policy, and when you pass away, the insurance company pays your family, no matter when it happens. It’s great if you want insurance that lasts forever without having to get a new policy when one ends.

Whole of life insurance is often more expensive than term life insurance for the same amount of money it pays out. It also usually includes extra features. For example, you might be able to use the insurance as a loan, which is part of why it costs more.

There are some whole of life policies that are cheaper than others. They cover for less time and pay out smaller amounts. These simpler policies don’t have the extra features like borrowing money from them. A common type of this insurance is for people over 50, which accepts everyone in that age group.

Joint life insurance

If you and your partner want to make sure that the other person and your kids are taken care of if one of you dies, joint life insurance might be a good choice.

This type of insurance covers both of you together. If one of you passes away, it pays out money. It’s a good way to know you’re both protected. But, it’s important to know that most joint life insurance policies only pay once. So, after one person dies and the policy pays out, the other person won’t have coverage anymore. They’d need to get their own separate insurance then.

Joint life insurance means you both are insured under one policy, and you make one payment each month. But, it only pays out once during the policy’s term. If you each have your own policy, you’re both covered separately, but it means paying two premiums every month.

Critical illness coverage

Critical illness cover is insurance that gives you a big amount of money if you get really sick. It’s there to help you pay for things when you’re too sick to work. This can include medical costs or changes you need to make to your house.

How much money you get depends on your policy. It could be a part of your total insurance amount or a set amount of money. Each insurance company has different rules for this. Usually, you have to choose this cover when you first get your policy, not later on.

It’s really important to know which serious illnesses your policy covers and for how long it protects you.

Terminal illness coverage

Terminal illness cover is a type of insurance that gives your family a big amount of money if doctors say you have an illness and have only up to twelve months to live.

When you and your family are going through such a tough time, this cover can really help by taking away some money worries.

Children’s cover

Children’s cover is insurance that pays a one-time big amount of money if your insured child gets very sick. This money can help with things like medical bills or changes you might need to make to your house because of your child’s illness.

The amount you get could be part of your total insurance or a set amount, and this varies with each insurance company. Usually, you need to choose this cover when you first get your insurance, not later on.

It’s important to know exactly what illnesses are covered for your child and how long the cover lasts.

What is life insurance?

Life insurance is a plan that pays out a big sum of money if you, the person with the insurance, die during the time the policy covers. It can also pay out if you get really sick and aren’t expected to live more than a year. The idea is to give your family some money to help them out after you’re gone, like with paying off a house or keeping up their lifestyle.

There are two main types of this insurance: level cover and decreasing cover.

The one you pick changes how the amount of cover and its cost might change over time. They’re made for different money needs. For example, if you want to make sure your mortgage gets paid if you die during the policy, you might choose decreasing cover. This means the value of the insurance goes down over time, but what you pay each time stays the same. This matches how a mortgage usually decreases over time too. That’s why it’s sometimes called mortgage protection insurance.

Just remember, this insurance doesn’t build up any cash value. If you stop paying, your cover stops too. The policy pays out just once and then it’s done.

How much does life insurance cost?

How much you pay for life insurance can change based on a few things:

• Age: Usually, the older you are, the more you pay because there’s a higher chance of health problems.
• Lifestyle: If you don’t live healthily, like drinking a lot or being overweight, it can make your insurance cost more.
• Health: Already having health issues can make your insurance more expensive, especially if it’s a serious, ongoing problem.
• Family Health History: If your family has had serious health issues, it might affect your cost, because you might have a higher chance of getting those issues too.
• Job: Risky jobs can make your insurance cost more compared to safer jobs.
• Smoking: If you smoke or use nicotine products like vapes, you’ll pay more because of the health risks.
• How Long You’re Covered: Longer insurance plans usually cost more than shorter ones.
• How Much Cover You Want: The more coverage you want, the higher your payments will be.

It’s really important to answer the insurance company’s questions truthfully when you apply. If you don’t, it could cause big problems for your family later, like the insurance not paying out when it needs to.

What does my life insurance cover?

It’s mainly there to give your family money to help them out if you die. But, it doesn’t usually cover you if you get really sick and can’t work – for that, you might need something called critical illness cover. What’s exactly covered can be different depending on which insurance company you’re with, so it’s good to read your policy carefully.

And yes, even if something unexpected like a bungee jumping accident happens, the insurance will still pay your family. But remember, it’s all about keeping them financially secure, even if they might be upset about the risky stuff you did!

Can I choose who the money goes to when I pass away?

Mostly, yes, but you need to set things up right.

• Joint Life Insurance: If you have a policy with someone else, like your partner, they usually get the money if you die. But, if you break up, you might be able to change it into two separate policies.
• Single Life Insurance: If it’s just your policy, the money goes into your stuff (called your ‘estate’). If you want a specific person to get the money (a ‘beneficiary’), you might want to put your policy in a Trust. Here’s why:
  • Avoids Tax: Putting it in a Trust means it’s not part of your estate for tax when you die, so no Inheritance Tax on the money given to your family or friends.
  • Faster Payout: If you have other people (trustees) managing the Trust, they can get the money to your family or friends faster.
  • Making a Will: You can also say who gets the money in your will, but it might not be as good for taxes as a Trust.

It’s smart to get legal and money advice if you’re thinking about a Trust or making a will for your life insurance.

Do I need life insurance?

It really depends on your situation.

Ask yourself if you have people like a partner or kids who rely on you for money. If you do, life insurance can be a good way to make sure they have some money to help them out if something happens to you.

The money from life insurance can be used for big things like paying off a house or everyday expenses like bills and taking care of kids.

If you haven’t planned anything for your family for when you’re not there, life insurance might be something you should think about.

How long do you need life cover for?

Cover until you die

• Whole of Life Insurance: Pays out no matter how old you are when you die.
• Term Life Insurance: Only pays if you die during the policy’s term, which can be 1 to 40 years.

Cover while you have a mortgage

• Decreasing Term Life Insurance: The payout gets smaller over time, matching your mortgage repayments.
• Fixed Term Life Policy: The payout stays the same throughout the term, letting you pay off the mortgage and give the rest to your family.

Cover when you are older

• Life insurance gets pricier as you age, so it’s good to look around early.

• If Over 50 and Healthy: Term or whole life policies are options, but they get more expensive the longer you wait.
• If Over 50 with Health Issues: You might get term or whole life insurance, but there’ll be fewer choices and higher costs.
• Over 50s Life Insurance: Accepts everyone, no matter their health, and offers a fixed payout. But, you might pay more in than what gets paid out if you live a long time.

What kind of payout do you want?

There are two ways your family can get money from life insurance, depending on what kind of policy you choose:

• A Lump Sum: This is a big amount of money all at once. It can be used to pay off your house or give your family a bunch of money to use.
• An Income: This is smaller, regular payments that can help your family with their monthly costs like house payments or rent. But remember, these payments usually stop when the policy ends.

For a whole of life or an over 50s life insurance policy, you usually get a lump sum. But with a term life insurance policy, you might have both options to choose from.

Which payout is right for me?

How much money your family gets from life insurance depends on when you pass away:

• If You Die Just Before the Policy Ends: With an income payout, your family gets monthly payments only for the few months left. But with a lump sum, they get all the money at once, no matter how close to the end you are.
• If You Die Early in the Policy: With an income payout, your family gets monthly payments for the remaining years, which helps over time. But if it’s a lump sum, they get all the money right away, which might be more than what you paid in premiums.

Life policy pros and cons

Pros of term life insurance

• Can match up with your mortgage.
• Your payments stay the same during the policy.
• More options for how you get paid.

Cons of term life insurance

• Only pays if you die during the policy’s term.
• If you have a policy where cover decreases, the payout gets smaller over time.
• Inflation can make the payout worth less over time.
• Doesn’t cover every reason for death.

Pros of whole life insurance

• Pays out no matter when you die.
• No age limit for making a claim.

Cons of whole of life insurance

• Doesn’t cover every reason for death.
• Sometimes you pay more than what gets paid out.

Pros of over 50s life insurance

• Everyone over 50 gets accepted.
• You can pay small premiums.

Cons of over 50s life insurance

• Sometimes you pay more than what gets paid out.
• If you miss payments, you lose any money you’ve paid in.
• Only for people 50 and older.

How does life insurance work?

Life insurance works by giving your family money after you pass away. They can get this money all at once or in smaller amounts over time. This helps them with money stuff when you’re not there anymore.

How much money they get depends on what kind of plan you pick and how much coverage it has.

You can choose how the money is given to your family. It can help pay for things like your house or rent, or you can leave it as money for them to have later on.

What types of life insurance are there?

There are two main kinds of life insurance:

Term life insurance policies

These last for a set time, like 5, 10, or 25 years. They only pay out if you die during this time.

The types of term policies are:

• Level: Pays a fixed amount if you die within the term. The payout doesn’t change. It’s straightforward and usually the cheapest.
• Decreasing: The payout gets smaller each year. It’s good for paying off things like a mortgage that decrease over time.
• Increasing: The payout grows over time to match rising costs of living (inflation).

Whole of life insurance policies

These pay out whenever you die, as long as you keep paying the premiums.

• Often used for funeral costs or Inheritance Tax planning.
• They cost more than term policies. If you live a really long time, you might pay more into the policy than what will be paid out.

Over 50s life cover

Over 50s life cover policies will definitely pay money to your family when you die. But, they might not always be the best deal because sometimes you pay more into the policy than what your family will get out of it.

Also, the Financial Conduct Authority has said that some ads for over 50s plans can be confusing. They make people think they’re getting a policy that will fully pay for their funeral, but that might not be true.

Single or joint policy life insurance?

You can pick either a single policy just for you, or a joint one that covers both you and someone else, like your partner.

• Joint Life Insurance: If one person dies, the other person (like your spouse) gets the money, unless you’ve set up something different.
• Single Life Insurance: If you die, the money becomes part of your stuff (your ‘estate’) and you decide who gets it.

A joint policy usually costs less than having two separate ones for each person. But, remember, it only pays out once after the first person dies. If you have two separate policies, there will be money paid out when each person dies.

Do you need life insurance?

Life insurance gives money to your family when you die. It’s not for when you can’t work because of illness or disability. It’s a good idea to have it if you:

• Have kids who depend on you.
• Have a partner who needs your income.
• Pay a mortgage for a house where your family lives. The insurance can help them if you’re gone.
• Want to make sure there’s money for your funeral.

You might not need it if:

• You’re single and no one depends on your income.
• Your partner makes enough money for your family.
• You don’t make much money and could get government benefits.

Check if your job already gives you something like this. Some jobs have ‘death in service’ benefits tied to your salary. If it’s enough, you might not need another policy. But if you leave that job, you lose that cover.

Also, think about if getting life insurance money could change any government benefits your family might get without it.

How much is life insurance?

The price of life insurance can change based on different things, but it’s usually seen as good for the money you spend. You can get a policy that gives your family good financial support starting at just a little bit each day.

What you pay each month depends on:

• How Old You Are
• Your Health
• How You Live (like if you exercise)
• If You Smoke
• Health Problems in Your Family
• How Long You Want the Policy For
• Your Job (risky jobs might cost more).

The cost also changes based on how much cover you get. To figure out how much you need, think about:

• Any Debts You Have
• Your House Payments or Rent
• How Many People Rely on Your Money
• Your Take-Home Pay or Other Money You Get

How do I buy life insurance?

The cost of life insurance can be different from one place to another, so it’s a good idea to look around and compare prices.

You can find life insurance quotes at:

• Banks
• Insurance Brokers: They can help you find the right policy.
• Comparison Websites: Great for seeing different options side by side.
• Insurance Companies: Some sell directly to you.
• Credit Card Companies
• Financial Advisers: They can give you advice on what to choose.
• Stores: Even some big supermarkets offer life insurance.
• Mortgage Providers: When you get a mortgage, they often offer life insurance too, but you might find a better deal somewhere else.

Checking out all these places can help you find the best price for your life insurance.

How to cancel life insurance

You can cancel your life insurance whenever you want, but keep these things in mind:

• Cost of New Cover: If you get a new policy later, it might cost more because insurance usually gets more expensive as you get older.
• Health Conditions: If you already have health issues, a new policy might not cover them.
• No Going Back: Once you cancel, you can’t restart the same policy.

Usually, there’s no fee to cancel. You just stop paying the premiums. But, you won’t get back any money you’ve already paid in.